November 16, 2021 | Economic Outlook

Economic Outlook - November 2021

  1. The Conference Board Leading Economic Index (LEI) for the U.S. increased by 0.2% in September to 117.5 (2016 = 100), following a 0.8% increase in August and a 0.9% increase in July. This data suggests the economy remains on a more moderate growth trajectory compared to the first half of the year. The Delta variant, rising inflation fears, and supply chain disruptions are all creating headwinds for the US economy. Despite the LEI’s slower growth in recent months, the broad strengths among the ten components are intact. We forecast growth ahead: 5.7% year-over-year for 2021 and in the 4% range for 2022.

  2. Current employment data is encouraging. The unemployment rate has dropped to 4.6% while payroll employment increased by 766,000 over last month. The number of open job postings exceed the number of job seekers. The four-week average of unemployment claims declined to a new pandemic cycle low, providing yet another sign of labor market improvement. We forecast that unemployment claims are likely to continue to decline in November.

  3. Strong employment translates to healthy economic activity. Hours worked and pay increases are lifting consumer income. Hours worked increased by an annual rate of 7.0% in the third quarter. With pay increases added in, nominal wages & salaries increased at a 9.9% annual rate. This strong increase in consumer income helps explain why nominal consumer spending increased at a 6.9% annual rate in the third quarter. As supply chain constraints ease, this consumer buying capacity may continue to sustain growth as more sought after goods such as autos become more widely available next year.

  4. Higher compensation, supply constraints and large increases in the money supply (M2) are driving inflation. The Labor Department recently reported that consumer prices rose strongly in October, up 0.9% on a seasonally adjusted basis from the prior month. Over the last 12 months, inflation is up 6.2%, the largest annual increase in more than 30 years. Investors are increasingly asking not whether the Federal Reserve will raise interest rates next year, but rather how much and how quickly it may do so. Higher interest rates may have a dampening impact on the economy.

  5. The Institute for Supply Management (ISM) Manufacturing Report On Business is considered a reliable economic indicator, as is the manufacturing sector in general. According to this closely watched report, economic activity in the manufacturing sector grew in October, with the overall economy achieving a 17th consecutive month of growth. The October Manufacturing index registered 60.8%. Figures over 50 indicate expansion. These are healthy indications, considering the inhibiting factor of widespread supply chain constraints.

  6. The Conference Board Consumer Confidence Index increased in October, following declines in the previous three months. The Index now stands at 113.8 (1985=100), up from 109.8 in September. This index reflects prevailing business conditions and likely developments for the months ahead. The monthly reading details consumer attitudes and buying intentions, from data collected by age, income, and region.

Sources: FactSet, Institute for Supply Management (ISM), The Conference Board, U.S. Bureau of Labor Statistics

Disclosure: This commentary reflects the opinions of Welch & Forbes based on information that we believe to be reliable. It is intended for informational purposes only, and not to suggest any specific performance or results, nor should it be considered investment, financial, tax or other professional advice. It is not an offer or solicitation.

For more information, call Ed Sullivan, Vice President, at 617-557-9800, or email him at